MODEC sets out to fortify FPSO business while embracing decarbonization and new opportunities

With the current energy ecosystem in mind, Japan’s FPSO operator MODEC has unveiled its new, mid-term business plan, covering the period from 2024 to 2026, which spotlights the Japanese player’s intention to further strengthen the profitability of its core FPSO business, strategically invest funds to decarbonize its FPSO units, develop new opportunities, and bolster its business foundation, including its human capital.

With a vision of “pioneering a world where the ocean and humanity co-exist in harmony,” MODEC is on a mission to unlock the ocean’s potential by supplying “unique floating solutions for a sustainable future.” To this end, the Japanese firm has formulated a mid-term business plan, covering the three years through fiscal year 2026, which comes with a slogan ‘Explore a Sustainable Future with Innovation.’

The plan is formulated by backcasting from the vision for the next ten years, known as its ‘Vision 2034,’ taking into account the business environment surrounding the company and the accelerating global trend toward decarbonization. The firm will focus on sustainability management.

MODEC outlined: “We will contribute to society by ensuring a stable energy supply while reducing the carbon dioxide emissions in our core business of FPSO operations. In addition, we will contribute to the realization of an environmentally friendly society by promoting floating offshore wind power, alternative energies, and digital businesses, leveraging our unique floating and digital solutions. We will also work to expand our human capital and foster a corporate culture that supports these initiatives.”

MODEC expects its earnings during the new mid-term business plan period to be strongly supported by stable leasing revenues from the five charter contracts that started operation during the previous mid-term business plan period, as well as revenues during construction from the two large projects for which orders were received last year.

The Japanese player has set financial targets of return on equity, price-to-earnings ratio, and adjusted EBITDA, in addition to net income, to achieve sustainable growth and further promote cash flow and cost of capital-conscious management. The mid-term business plan 2024-2026 is based on the company’s recently renewed vision, mission and core values, and newly established materialities.

“Coexisting with the decarbonization trend and maintaining stable energy supply remains an important issue, and the oil companies are continuing the deep-sea oilfield development projects,” explained MODEC while anticipating steady demand related to its FPSO systems for oil and gas production, especially the ultra-deepwater large-scale projects.

Last year, the Japanese player secured new FPSO construction orders with ExxonMobil Guyana for the Uaru project in the Stabroek block off the coast of Guyana, and Equinor Brasil Energia for the BM-C-33 block field offshore Brazil.

Rystad Energy underlines that Guyana is second only to Brazil in the number of new FPSO projects set to kick off operations. The country is expected to produce 1.7 million barrels of oil per day by 2035, which would make it the fourth-largest offshore oil producer in the world.

The South American FPSO market is on the rise alongside the global FPSO market, which is estimated to reach $20 billion in 2027, based on a report by The Insight Partners. MODEC has been busy with new FPSO deliveries. One of the recent ones was confirmed in August 2023.